Viewing posts from: November 2000

Is this the time to invest and where?

By Charles Hutchinson
This article is published on: 23rd October 2019

I was having lunch with a friend of many years the other day. When I asked why he was not currently invested and why he had not been for some time, he replied that it is too dangerous a time in the world with too many problems and that we were on the verge of a global market collapse. Further investigation revealed that he had had his money in the bank, largely unprotected against bank failure and earning less than a single digit interest rate (and that was for his Sterling) which was also taxed. What made it worse was that the majority of it is in Euros and he was actually having to pay charges to the bank for the privilege of keeping it there.

Although this sounds an extreme example of bad financial planning, it shows that we need to take professional advice sometimes. We need to diversify and we need to understand that the world is no worse or insecure than during the terrible wars and crises of the past. Money is not a Will o’ the Wisp, disappearing into thin air when not being utilised; it has to have a home in which to dwell for better or for worse. The secret, therefore, is to place it for the better in homes that are largely secure, allowing you to diversify smaller amounts somewhere else for better returns. In this era of low interest rates, which is set to continue for quite a while, that home should not be in a bank, except for your current account and a cash reserve for emergencies and planned spending over the next, say, 2-3 years. There is limited protection against bank failure and the return to be obtained is taxable and insignificant.

My old friend lamented that this was not the time to enter the market, to which I replied that there is no good time until you have left it too late (this is true of most markets). It is not market timing which is important, but time in the market. Unless you have a trading account for speculative investment, you must always plan to invest for the long term (5 years plus). The investment house Fidelity produced some excellent statistics which showed that (once invested) by not being in the market for just 10 specific days in the last 10 years, you would have lost nearly 50% of the market (London FTSE100) growth each year versus staying fully invested. Missing 20 days, this would have been halved again.

Missing out on 30 days, you wouldn’t have broken even after brokerage charges. Markets are like the tide on the sea shore – they rise and they fall. The difference is that each time the tide comes in, it reaches a little higher up the beach. And that is caused by a natural phenomenon called inflation, which moves hand in hand with growth

I asked my friend if he was invested in 1987. He looked away gloomily and said that he had instructed his broker to sell out all his positions when the October crash arrived that terrible Monday morning. He watched with dismay as the markets around the world collapsed as soon as they opened and there were no buyers, fuelled by a flawed computer system over which there was no control. He lost over 35% of his capital over the next four days. At the time I was a trainee investment manager on the Australian desk of a prominent investment house in the City. The telephones rang off the hook and our advice was emphatic and simple: do not bale out. Hang in there. I remember my mentor, who was a keen yachtsman, saying, “If you are in a boat out at sea and a big storm blows up, you don’t jump overboard, do you? No. you batten down the hatches and wait it out”. This is the advice I have always given my clients ever since. Those who heeded our advice and waited it out actually ended that year in a higher position than when it started.

I can hear some readers already asking where they should place their hard earned capital after a life time of working and saving. There is no one single answer to this. It depends on your risk tolerance, your likes, and your needs (now and in the future). As ably described in our book “A Guide to Investment Risk” by Peter Brooke (opposite), diversification is everything.

This could be across multiple global asset classes (to include gold bullion, diamonds, antiques, rare paintings, rare books, classic cars, etc.) or it could be an investment portfolio containing multi global assets managed by multi managers of different expertise and disciplines. It is always wise to remember that Risk is linked directly to Reward. The higher or lower each one is will reflect in the other. Also reflected is volatility, where the higher performing assets will mostly endure higher volatility (continuous high/low oscillations which are not for the faint hearted). When doing financial reviews with clients, we are careful to establish their risk appetite and the returns that can be expected taking into account that risk.

You cannot have a high performing low risk investment – there is no such animal. What you can expect from a good adviser is a steady performing investment at whatever level you set your tolerance to give you the return you want as long as you run the course, who does not try to time the market and who picks long established names who have been around many years. We often recommend long established (each over 150 years) London based investment managers to manage a client’s private portfolio, or we place clients in multi asset, multi manager investment funds. To those who are averse to volatility, we offer “smoothed” investments which are described by my colleague Anthony Poole elsewhere in this website in “Tax Efficient Investments“. These are safe secure investments which are tax efficient and which produce a steady return year after year, way above anything you can expect from a bank product.

Greed is the enemy of many investors. It is the curse of humanity. If you are not greedy, your money will grow securely at a respectable pace. Manage your own expectations – do not alter course when you see your returns are doing well. Do not cut corners, especially with tax. We only choose tax efficient products. Investment choice and tax efficiency are completely entwined. Tax is another subject to be explored in more detail and is covered elsewhere on this site by my colleagues. If you would like a copy of our Spanish Tax Guide 2019 (there is also one available for France), please contact me below.

To discuss these points in more detail, why not call me to make an appointment and let’s have a coffee together? Please remember, there is no commitment on your part but such a huge commitment on ours! With care, you will prosper.

Spain/Gibraltar Tax Treaty – tax residency of individuals

By Charles Hutchinson
This article is published on: 5th June 2019

05.06.19

On 4 March 2019, Spain and the UK (acting on behalf of Gibraltar) signed an international agreement on taxation and the protection of mutual financial interests.

This is the first agreement on Gibraltar with Spain since the 1713 Utrecht Treaty. However it does not imply any modification of the respective legal status of Spain and the UK with regards to sovereignty and jurisdiction over Gibraltar.

It is important to note that this treaty has not yet been ratified by the two respective national parliaments.

The treaty incorporates the provisions for tax residency of natural persons:
1- Whereby natural persons are deemed resident in Spain and Gibraltar according to their domestic law,
(i) They shall be tax resident only in Spain when any of the following circumstances exist:
a) they spend over 183 overnight stays of the calendar year in Spain, from which sporadic absences from either Spain or Gibraltar shall not be deducted,
b) their spouse (not legally separated) or partner and/or dependent ascendants or descendants reside in Spain,
c) the only permanent home at their disposal is in Spain, or
d) 2/3 of their net assets held directly or indirectly are located in Spain.

(ii) They shall be tax resident only in Spain when the above provisions are not conclusive, unless they are able to provide reliable evidence that they have a permanent home to their exclusive use in Gibraltar and remain in Gibraltar over 183 days per annum.

2- Spanish nationals who move their residency to Gibraltar after the date on which this agreement is signed shall in all cases only be considered tax residents in Spain.

3- Non-Spanish nationals who provide proof of their new residency in Gibraltar shall not lose tax residency in Spain within the tax period when the change is made and during the four subsequent years, unless they spend less than one complete tax year in Spain or are registered Gibraltarians (generally British citizens that have resided in Gibraltar for over ten years) that spend less than 4 years in Spain.

4- HNWI, Cat 2, HEPSS or any other equivalent Gibraltar tax schemes shall not by itself constitute proof of tax residency in Gibraltar.

In conclusion
You will be considered tax resident in Spain if you meet any of the conditions where you are deemed resident in Spain (183 days, family ties, permanent home, 2/3 net assets) or you cannot prove that you spend more than 183 days in Gibraltar and own a house at your exclusive disposal there, or if you are Spanish national in all cases (Spanish domestic law currently is more restrictive because nationals do not lose tax residency when moving to a tax haven in the tax period and subsequent four years).

Non-Spanish nationals who have been tax resident in Spain for more than one year and have moved to Gibraltar will be deemed tax residents in Spain for the following four years after they moved. Gibraltarians who have been resident in Spain for more than four years will continue to be resident for four years more.

The rules for Spanish nationals will come into force as of 4 March 2019 if the Treaty is formally ratified.

The rules for non-Spanish nationals will come into force for the taxable periods after the ratification date, the earliest being on 1 January 2020.

Non-Spanish nationals may use this window to consider their position.

In spite of claims for historical Spanish sovereignty over The Rock, Spain (PSOE) has recognized the existence of both a separate tax authority in Gibraltar and the existence of registered Gibraltarians. Moreover, it is proposed that once the treaty is ratified, Gibraltar should be removed from the Spanish blacklist of tax haven jurisdictions.

Source: JC&A Abagados, Marbella

Arts Society Event – San Roque, Costa del Sol

By Charles Hutchinson
This article is published on: 22nd March 2019

22.03.19

The Spectrum IFA Group again co-sponsored an excellent Arts Society de La Frontera lecture on 20th March at the San Roque Golf & Country Club on the Costa del Sol. We were represented by one of our local and long-serving advisers, Charles Hutchinson, who attended along with our co-sponsors Rathbone Brothers represented by Chris Wanless. Also present was the society’s European Chairman Jo Ward and Peter Kirrage, who is on the Arts Society Global Board of Trustees.

The Arts Society is a leading global arts charity which opens up the world of the arts through a network of local societies and national events throughout the world.
With inspiring monthly lectures given by some of the UK’s top experts, together with days of special interest, educational visits and cultural holidays, the Arts Society is a great way to learn, have fun and make new and lasting friendships.

At this event, over 140 attendees were entertained by a talk on Tamara de Lempicka: Art Deco and the Roaring Twenties by Harry Fletcher, who is one of the UK’s top experts in this field. He gave an excellent lecture, revealing to us the artist and notorious personality behind the individual style one has seen everywhere but most of us never knew who it was!

The talk was followed by a drinks reception which included a free raffle for prizes including CH supplied lovely coffee table book on the artist, champagne and an elegant glass jug. Rathbones also supplied stylish personal notebooks, a 12 year old whisky and a magnum of Rioja.

All in all, a great turnout and a very successful event at a wonderful venue. The Spectrum IFA Group was very proud to be involved with such a fantastic organization during its current global expansion and we hope to have the opportunity to do so again.

Possible effects of Brexit in Spain

By Charles Hutchinson
This article is published on: 6th December 2018

06.12.18

At 11pm on March 29, 2019, the United Kingdom will officially leave the European Union.

Much has been written about the millions of Europeans living in the UK and the millions of Britons living in Europe, but little about the tax consequences for Britons who are non-resident in Spain but have interests in the country, mainly owning real estate properties.

Britons could lose the following tax benefits in Spain when the United Kingdom leaves the EU:

Non-resident income tax on real estate: the Spanish Government imputes a benefit in kind to owners of holiday houses that is taxable as income. By definition, a house owned by a non-resident cannot be their main home, so every non-resident owner of a house in Spain, even if it is not rented out, has to declare an imputed income and pay taxes on that income annually. The income tax rate is 19% for those living in an EU member state, Iceland and Norway, but it is 24% for the rest.

Therefore, Britons could end up paying 24% tax on the imputed income instead of current 19%.

Rental income tax: non-resident owners of Spanish properties who get income from renting them out are liable to Spanish non-resident income tax on the gross income. However, those living in an EU member state, Iceland and Norway are entitled to offset some costs from their rental income and therefore are taxed only on the net profit.

Therefore, Britons could end up paying 24% tax on gross income with no deductibles, compared to the current 19% on net profit.

Inheritance and gift tax: regional governments are empowered to regulate this tax, the consequence being that the tax liability will vary depending on the region. The difference can be substantial.

Non-residents are subject to Federal law, which is normally less favourable than Regional law. However, those living in an EU member state, Iceland, Norway and Liechtenstein can choose the application of the most favourable legislation for their situation, Federal law or Regional law (in which the properties of major value are located).

Therefore, Britons could lose the right to apply for Regional law. In Andalucía, for example, there is a threshold of 1 million euro, meeting certain requirements, to which Britons could not be entitled.

This is just a short list of the possible tax consequences of Brexit. The UK may join the EEA (European Economic Area) like Iceland, Norway and Liechtenstein. If the Norway-style agreement is adopted, a major part of EU law could still apply, but that is by no means clear at this point.

*Source: JC&A Abogados (Santiago Lapausa)

Tax threat: the consequences of CRS – The Spanish Situation

By Charles Hutchinson
This article is published on: 14th June 2018

14.06.18

Unlike the UK non-dom or the Portuguese non-habituale tax rules, Spain does not have a specific tax offereing for those planning to come and live in Spain. A taxpayer is either classifieds as resident (taxed on worldwide income and wealth) or non-resident (taxed only on Spanish income and assets).

Those trying to escape from the 183-days rule of physical presence in Spain to avoid been deemed tax resident could be facing an unexpected problem.

Governments all over the World have amended their domestic legislation over the last few years aimed at gathering as much information as possible from current and potential taxpayers and Spain is no exception. Governments have also signed agreements to exchange that information with each other and to disclose relevant data, primarily under the auspices of fighting money laundering and terrorism. Lately, this has had a direct impact on individuals and corporate taxation.

All these changes and improvements equally affect big corporations, large stockholders, important CEOs and ordinary people. Regrettably, the speed and frequency at which those changes take place makes it difficult for ordinary people to keep up and stay up to date with their obligations. Pensioners living abroad are a group particularly affected.

In our experience, we know many people who were just “out of the loop” by ignorance, going about their daily lives without being aware of how all these changes affect them. One of these new rules is the OECD´S COMMON REPORTING STANDARD (CRS).

As of 1 January 2016, Spain fully adopted the provision of the Council Directive 2011/16/EU on administrative cooperation in the field of taxation and the OECD CRS for the automatic exchange of financial account information.

Under the CRS and EU Directive, financial institutions in participating jurisdictions will report the full name and address, jurisdiction of tax residence, tax identification numbers and financial information of individual clients to their local tax authorities, which will then automatically exchange the data with the tax authorities of the participating countries where the individuals are tax resident.

Spain is one of the 102 committed jurisdictions and the list also includes traditional off-shore jurisdictions such as Gibraltar, Guernsey, Jersey or the Isle of Man. As of 5 April 2018, there are now already over 2700 bilateral exchange relationships activated with respect to 80 jurisdictions committed to the CRS. This link shows all bilateral exchange relationships that are currently in place for the automatic exchange of CRS:

http://www.oecd.org/tax/automatic-exchange/international-framework-for-the-crs/exchange-relationships/#d.en.345426

Financial institutions in all participating jurisdictions will be obliged to ascertain and verify the tax residence status of their individual clients by application of specific due diligence procedures under the CRS.

The automatic exchange of information related to financial accounts held by the end of year 2015 and new ones opened afterwards began in 2017. Hence, sooner or later, in cases where there was information exchanged that did not match the information provided by the taxpayer in their declarations and tax returns, people started to receive notifications from the tax office.

Those who have not been registered as resident or have not realized that they should have registered as resident, could be in trouble when the Spanish tax authorities receive information about a supposedly resident taxpayer. This information is gathered by the due diligence process that banks and financial institutions, including trustees, have to carry out. In some cases this can lead to the conclusion that they are resident in Spain (i.e., the postal address to where Banks send correspondence, the bank account to where they regularly transfer funds, the country where credit cards are frequently used, etc.). Spanish tax residents who have not fully disclosed their foreign portfolios to the Spanish tax authorities may encounter trouble as well. Full voluntary disclosure by means of late filings could avoid potential tax fraud penalties.

It is crucial to check with your banks, financial agents, trustees, etc. if they have reported anything to a wrong country. Once the information gets to the tax authorities, those authorities will not doubt or care if the information is accurate or not, even if you try to prove otherwise, because the information has been provided by a Government of another country and it is understood that they, as well as the bank or financial entity who has previously reported to that Government, have complied with the regulations. In our experience, at least in Spain, if information provided by a Bank was not accurate, that Bank would have to amend whatever they had previously reported to their Government. Thus in turn it will amend the information sent to the Spanish tax authorities. The taxman will not stop demanding the taxpayer to pay the corresponding taxes unless the Government of the other country recognizes that it was a mistake.

Source: Santiago Lapausa of JC&A Abagados, Marbella

Spectrum sponsored Arts Society de la Frontera

By Charles Hutchinson
This article is published on: 4th January 2018

04.01.18

The Spectrum IFA Group again co-sponsored an excellent Arts Society de la Frontera lecture on 13th December at the San Roque Golf & Country Club on the Costa del Sol.

We were represented by one of our local and long-serving Advisers, Charles Hutchinson and Jonathan Goodman, who attended along with our co-sponsors Richard Brown and Lewis Cohen from Tilney Investment Management. Tilney also very kindly hosted a lunch afterwards for the committee, the DFAS Chairman and the Lecturer.

The Arts Society is a leading international Arts charity which opens up the world of the arts through a network of local societies (such as here in the Costa del Sol) and national events throughout the world.

With inspiring monthly lectures given by some of the country’s top experts, together with days of special interest, educational visits and cultural holidays, it is a great way to learn, have fun and make new and lasting friendships.

At this event, around 110 attendees were entertained by a talk on the art of Leonard da Vinci and the Mona Lisa entitled “The Woman who ate her Husband” by Nicole Mezey who is one of the UK’s top experts in this field. She was excellent and kept the audience gripped and entertained with her knowledge and humour.

The talk was followed by a drinks reception which included a free raffle for prizes including CH produced Champagne, mince pies and a Christmas pudding, together with a fully illustrated book on Leornardo. Tilney as usual excelled themselves by providing the top prize of a wooden set of candle holders designed and beautifully crafted by Viscount Linley, the Queen’s nephew, which caused a further stir after their last two years’ prizes!

All in all, a great turnout and a very successful event at a wonderful venue. The Spectrum IFA Group were very proud to be involved with such a fantastic organisation and we hope to have the opportunity to do so again in 2018.

Spectrum sponsor the DFAS event – Costa del Sol

By Charles Hutchinson
This article is published on: 16th December 2016

16.12.16

The Spectrum IFA Group again co-sponsored an excellent DFAS (Decorative & Fine Arts Society) lecture on 14^th December at the San Roque Golf & Country Club on the Costa del Sol. We were heartily represented by one of our local and long-serving Advisers, Charles Hutchinson, who attended along with our co-sponsors Richard Brown, Lewis Cohen and Harriette Collings from Tilney Bestinvest. Tilney Bestinvest also very kindly hosted a lunch afterwards for selected potential clients, the DFAS Chairman and the Lecturer.

The National Association of Decorative & Fine Arts Society (NADFAS) is a leading Arts charity which opens up the world of the arts through a network of local societies (such as DFAS in Spain) and national events throughout the world.

With inspiring monthly lectures given by some of the country’s top experts, together with days of special interest, educational visits and cultural holidays, NADFAS is a great way to learn, have fun and make new and lasting friendships.

At this event, over 120 attendees were entertained by a talk on Dutch Genre Painting by Lynne Gibson who is one of the UK’s top experts in this field. She was excellent and kept the audience gripped and entertained with her knowledge and humour – especially the hidden saucy side to the art which she revealed to great effect!

The talk was followed by a drinks reception which included a free raffle for prizes including CH produced Champagne, mince pies and a lovely coffee table book on Dutch Genre Painting. Tilney Bestinvest also supplied a wooden permanent calendar designed and beautifully crafted by Viscount Linley, the Queen’s nephew, which caused a further stir after their last year’s prize!

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The Spectrum IFA Group co-sponsored NADFAS lecture

By Charles Hutchinson
This article is published on: 25th October 2016

25.10.16

The Spectrum IFA Group co-sponsored an excellent NADFAS (National Association of Decorative & Fine Arts Societies) lecture on 19^th October at the San Roque Golf & Country Club on the Costa del Sol. The Spectrum IFA Group was represented by one of our local advisers, Charles Hutchinson who attended along with our co-sponsor Paul Ellis from Currencies Direct.

The National Association of Decorative & Fine Arts Societies is a leading arts charity which opens up the world of the arts through a network of local societies and national events.

At this event, over 130 attendees (all our target market) were entertained by a talk on The Life and Work of Henry Murphy, one of Britain’s best but most neglected Goldsmiths. The presentation was given by John Benjamin of Antiques Roadshow fame, who kept the audience gripped with his knowledge and humour. We were fortunate enough to have him agree to private valuations of attendees’ jewelry and especially any Fabergé items before the lecture.

The talk was followed by a Spectrum sponsored drinks reception which included a free raffle for prizes including a CH obtained (very difficult to find, as out of print) glossy coffee table book on Henry Murphy and his works by John Benjamin himself which he gladly signed for the lucky first prize winner. Also bottles of Champagne and Cava. Currency Direct supplied a bottle of fine Brandy and a very useful car sunshade.

All in all, a great turnout and a very successful event at a wonderful venue. The Spectrum IFA Group are very proud to be involved with such a fantastic organisation and we shall be sponsoring the December lecture and drinks reception after, when we will have Tilney Bestinvest as co-sponsors.

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Spectrum sponsored DFAS lecture – Costa del Sol, Spain – Wednesday 16th March.

By Charles Hutchinson
This article is published on: 7th April 2016

The Spectrum IFA Group co-sponsored an excellent NADFAS (National Association of Decorative & Fine Arts Societies) lecture on 16th March at the San Roque Golf & Country Club on the Costa del Sol. The Spectrum Group was represented by our local adviser, Charles Hutchinson, assisted by his wife Rhona who attended along with our co-sponsor George Forsyth from Prudential International.
The National Association of Decorative & Fine Arts Societies is a leading arts charity which opens up the world of the arts through a network of local societies and national events.

At this event, around 150 attendees were entertained by an immensely interesting and informative historical talk on the Russian royal family and Fabergé’s Easter Eggs made for the Imperial Russian Court, by Toby Faber of the publishers Faber & Faber.

The talk was followed by a drinks reception which included a free raffle for prizes including CH produced Champagne and a coffee table glossy book on Fabergé. Prudential also supplied a presentation bottle of 12 year old malt whiskey and smaller gifts.

All in all, a good turnout and a very successful event at a wonderful venue. The Spectrum Group were very proud to be involved with such a fantastic organisation and we look forward to next season this Autumn.

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Spectrum sponsors the NADFAS event in Costa del Sol

By Charles Hutchinson
This article is published on: 24th February 2016

24.02.16

The Spectrum IFA Group co-sponsored an excellent NADFAS (National Association of Decorative & Fine Arts Societies) lecture on 17th February at the San Roque Golf & Country Club on the Costa del Sol. The Spectrum IFA Group was represented by our local adviser, Charles Hutchinson, assisted by his wife Rhona who attended along with our co-sponsors Ignacio Ortega & Tricia Anderson from Currencies Direct.

The National Association of Decorative & Fine Arts Societies is a leading arts charity which opens up the world of the arts through a network of local societies and national events.

At this particular event, over 100 attendees were entertained by a fascinating talk on Indian Textiles Art & Design by Jasleen Kandhari, Head of Department, Oxford University.

The talk was followed by a drinks reception which included a free raffle for prizes including CH produced Champagne and a coffee table glossy book on Indian Fabric Design. Currencies Direct also supplied a presentation box of Cognac and Chocolates and desk diaries.

All in all, a good turnout and a very successful event at a wonderful venue. The Spectrum IFA Group were very proud to be involved with such a fantastic organisation and we shall also be sponsoring next month’s event on the subject of Fabergé’s Imperial Easter Eggs from the Russian court.

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